Your home is one of the largest investments that you will likely make within your lifetime. For this reason, it is imperative that you understand the ins and outs of what contracts you may be getting into before you sign on the dotted line. If a potential home is part of an HOA (Homeowners Association) or a CDD (Community Development District) you must understand what that will mean and how that will affect you as a homeowner should you decide to purchase a particular property.
What is an HOA?
An HOA is a private group set up by a community to manage and enforce neighborhood rules. The HOA will collect fees from homeowners and will use those fees to maintain things like common areas; they can also charge one-time fees for special expenses that arise, such as roof replacement or emergency repairs. Fees are paid directly to the HOA. The HOA also serves to ensure that all community members follow guidelines made by the board of directors.
Community members elect this group and it consists of residents who are in charge of overseeing and enforcing the rules. These can include rules on home maintenance and desired home presentation (exterior colors, decor and other requirements can be enforced depending on the HOA).
What is a CDD?
Unlike an HOA, a CDD operates much like a local government with the purpose of serving residents within a community. Perhaps most commonly known to Florida, these entities are popping up in other regions as well. CDDs impose fees that are used to fund infrastructure and amenities within their boundaries. Fees can cover big infrastructure amenities like community pools, parks, roads or vital services like sewer and water, along with general maintenance. CDD fees are collected as part of a property’s tax bill and are tax deductible. Naturally, this means that property taxes are often higher within a CDD than in other areas.
What About Both?
There are instances where communities have both a CDD and an HOA. In these situations, the HOA will serve to enforce community standards and pay for the upkeep of common areas. The CDD will be responsible for the maintenance of the community infrastructure, such as sewers and roads.
Final Thoughts
There certainly are a few cons to CDDs or HOAs. Homeowners who don’t wish to experience additional monthly fees, higher taxes or unexpected or variable fees may wish to avoid these communities. However, it’s important to remember that these fees serve to play a role in preserving the value of your home through community amenities and neighborhood upkeep.
